Kazkommertsbank will seek more money from Kazakhstan’s pension and problem-loan funds to fuel lending growth while shifting bad assets to its unit, BTA.
Kazkommertsbank “will continue to participate in programs run by the central bank,” Magzhan Auezov, who was appointed chief executive officer in March, said last week in an interview. “We are very liquid now.”
Kazakh banks accumulated the world’s highest share of non-performing loans, about a third of total lending in 2013, due to a slowing economy, a collapse in property prices and alleged fraud. The central bank said yesterday that the share dropped to 13 percent as of July 1, helped by tax breaks and state financing, nearing its target of 10 percent by next year.
The lender is seeking to increase its tenge funding from an almost purely dollar base, he said.
Kazkommertsbank opened credit lines totaling $9 billion to BTA Bank, the defaulted lender it acquired last year, as it turns the unit into a center dealing with bad loans. It’s shifting some of its own problem assets to BTA, while planning to expand lending.
With the takeover of BTA, Kazkommertsbank has built the Central Asian nation’s second-largest branch network. Now it plans to “to pump it up with products, while trying to meet the lender’s standards of efficiency,” Auezov said.
Auezov declined to elaborate on the details, saying the bank is in the process of completing its merger with BTA.
Kazakhstan’s largest lender by assets agreed to get 250 billion tenge ($1.34 billion) in 10-year deposits from the central bank’s problem-loan fund. It has already received 38 billion tenge to refinance bad mortgages and sold at least 75.7 billion tenge of bonds to the state’s pension fund since March.
The government hasn’t decided whether to add another 250 billion tenge to the problem-loan fund, Kuat Kozhakhmetov, deputy chairman of the central bank, told reporters today. If the additional funds are approved, they will be deposited with the country’s largest lenders, including Kazkommertsbank, he said.
A “real clean-up” is possible as the problem-loan fund injects as much as 500 billion tenge into Kazkommertsbank and BTA Bank, Fitch Ratings said in survey of Kazakh banks this month. Kazkommertsbank is among the three largest Kazakh banks with the weakest ability to absorb losses, the rating company said in April.
While the lender seeks to reach a record of loan recoveries this year, having matched last year’s results in the first five months of this year, the challenge will be working with “hundreds of millions of dollars” of foreclosed assets, Auezov said.
Kazkommertsbank plans to merge its insurance units respectively with BTA Insurance, BTA Life, BTA Securities, while selling insurance company London-Almaty and its mortgage unit BTA Ipoteka, Auezov said.
The lender still needs to decide what to do with its stakes in other units abroad, including in Turkish Sekerbank, and a lender in Ukraine, Auezov said.
Kazkommertsbank is weighing whether to increase its stake in Sekerbank or to use the capital instead to boost lending in Kazakhstan, Auezov told reporters today.
“The question is where it’s more proper to allocate capital,” Auezov said. Using the money for lending in Kazakhstan “would be most rational.”